Report in The Daily Star, May 1, 2023
The Export-Import (Exim) Bank of China has recommended that Bangladesh consider using renminbi (RMB) as a loan currency when receiving financing from the country in order to facilitate deeper bilateral cooperation and accelerate the implementation of digital connectivity projects.
“Considering the ongoing US dollar [USD] crisis and progress in establishing digital connectivity, we strongly recommend your side consider using RMB as a loan currency,” said Li Qinxi, deputy general manager of the concessional loan department at Exim Bank of China.
On April 6, Qinxi had asked the Economic Relations Division about the potential use of RMB for a preferential buyer’s credit (PBC) project.
In a letter, he also proposed that RMB be used for all the subsequent PBC projects.
An ERD official said although a decision is yet to be taken in this regard, the finance ministry has sought opinions from Bangladesh Bank and the ERD on the issue.
But the proposal is logical considering the declining trend of the foreign exchange reserve, he added.
Bangladesh Bank officials say the government makes debt repayments to China in USD instead of RMB.
So, a logical decision will be taken on the issue in view of the current crisis.
The PBC project was one of 27 for which China assured loans of $20 billion as per a memorandum of understanding signed during Chinese President Xi Jinping’s visit to Dhaka in October 2016.
The letter from Exim Bank of China also said that according to the priority project list provided by Bangladesh, there is still potential for more cooperation.
However, it added that given the current fluctuations in USD rates, including interest rate benchmark hikes by the US Federal Reserve, both Bangladesh and China bear significant risks such as higher financing costs.
“Apart from the exchange rate risk, the shortage of USD has been an important adversity for our cooperation,” Qinxi said in the letter.
The rising cost of USD may lead to an increase in interest rates for following PBC-financed projects, he added. https://www.thedailystar.net/business/economy/news/consider-using-renminbi-loan-currency-3308476
